The estimated cost of harmonising pay and conditions for Scottish college staff could “absorb all of the Scottish government’s projected savings from college reform”, a new report by Audit Scotland warns.

Published today, the report on Scotland’s colleges points out that, after years of significant reform and budget cuts, the sector’s underlying financial position improved in 2016-17. The sector’s 20 incorporated colleges reported an overall underlying financial surplus for 2016-17 of £300,000, compared with an underlying deficit of £8 million in 2015-16. The cash held by colleges increased by 13 per cent in 2016-17, and the net value of their assets grew by 10 per cent.

However, the report notes significant variations between colleges, with several institutions facing significant financial challenges, according to Audit Scotland. It says staff costs remain the highest area of spending and were forecast to increase further, “mainly as a result of the costs associated with harmonising staff pay and other conditions”.

Colleges in Scotland recently returned to national bargaining after years of institutionalised bargaining, which led to significant disparities. Both support and teaching staff have since agreed pay deals, with the package for lecturers agreed last May including a commitment for all teaching staff to be moved on to a pay scale towards a salary of over £40,000. College managers said this represented an average 9 per cent pay increase last year.

‘Absorbing all savings’

The Audit Scotland report cites umbrella body Colleges Scotland, which has estimated the total cost of harmonisation at £50 million a year from 2019-20. “This would absorb all of the Scottish government’s projected savings from college reform,” it highlights. The reform process had involved a series of mergers and saw the sector reorganised into 13 college regions.

The report goes on to say: “The Scottish government is providing funding to cover the additional costs up to the end of academic year 2018-19. But it has not yet specified funding for academic year 2019-20, when the costs will increase most significantly.”

The report also cites the future impact of national bargaining for support staff as one of the factors risking colleges’ financial sustainability - among uncertainties around long-term funding of improved employment terms, the cost of maintaining buildings and land, and the potential impact of leaving the European Union.

‘Real-terms pay cut’

Larry Flanagan, general secretary of the EIS union, which represents Scottish college lecturers, said it was “encouraging to note that over the period when pay harmonisation for lecturers is being implemented, the overall financial position of the college sector is improving”.

“However, despite a reported surplus of £300,000 (a notable improvement from the £8 million deficit reported last year) and with more than £3 million being invested in arms’ length foundations, college lecturers are facing a real-terms pay cut, with management making a 2.5 per cent consolidated pay offer over three years,” he added.

Shona Struthers, chief executive of Colleges Scotland, said the report noted “significant elements of financial uncertainty for colleges, including the ongoing costs of national bargaining”. “Colleges are working in partnership with the Scottish government and SFC to ensure adequate sustainable funding which will enable colleges to continue to deliver benefits for students, employers and the economy,”she said.

FE, HE and science minister Shirley-Anne Somerville said the sector’s progress was “supported by significant Scottish government investment of more than £7 billion since 2007, including a near 10 per cent real-terms increase this financial year”.

What the report says

• The Scottish Funding Council’s 2017 estates condition survey indicates that college buildings require urgent and significant investment, estimating a backlog of repairs and maintenance over the next five years of up to £360 million. The SFC is providing £27 million of capital funding to colleges in 2018-19 to cover identified priorities.
• The college sector exceeded its targets for learning activity and full-time-equivalent student places in 2016-17. Student numbers increased by around 4 per cent, with most of the increase being students in part-time learning, particularly those under 16.
• The proportion of successful full-time college leavers who entered positive destinations, such as training, employment and higher education, remained largely unchanged from last year at 82.7 per cent. Student satisfaction remains high at over 90 per cent .
• The proportions of credits (units of learning) delivered to students from deprived areas, from ethnic minorities, with care backgrounds or with disabilities all continue to increase. Despite this, the gap in attainment between students from the least and most deprived areas is growing.
• Colleges have made notable progress in addressing the gender imbalance on engineering courses but have had less success in other courses. Some college boards also continue to have significant gender imbalances in their membership.